ASOS shares fall as pretax profit declines 31%

PhilipWaller

(Adds detail, CEO and trade union comment, updates share price)

LONDON--ASOS PLC (ASC.LN) shares fell Tuesday as the online fashion retailer posted a 31% fall in full-year pretax profit after booking a number of one-off items and said it is taking action to fend off potential cost pressures from a weak pound.

The company's shares dropped 422 pence, or 8%, to 4,910 pence after it made a pretax profit of 32.7 million pounds ($40 million) in the year to Aug. 31 versus GBP47.5 million in the same period a year earlier. Revenue rose 26% to GBP1.44 billion against the same period a year earlier.

Adjusted pretax profit, which strips out costs of closing its in-country China operation and a legal settlement, however, climbed 37% to GBP63.7 million from GBP46.4 million.

Retail sales rose 26% to GBP1.4 billion, with strong performances in the U.K. where sales rose 27%. European sales increased 28% and sales in the U.S. rose by half.

ASOS said it expects growth in sales to remain in the previously guided range of 20% to 25% and it would increase investment in technology.

"The pace at ASOS is continuing in the new financial year, which we are looking forward to with confidence," Chief Executive Nick Beighton said.

George Mensah at Shore Capital said: "We currently have factored in a sales growth rate of 21.2% for FY2017, this remains unchanged for now as do our earnings expectations."

Mr. Beighton added the company had taken action to reduce any impact of higher import costs on its business by increasing its hedging and cutting prices shortly after the U.K.'s June vote to leave the European Union.

"We're looking at the way the landscape has changed [following the referendum vote] and plotting our resources accordingly," he told reporters in a conference call.

Meanwhile, the company is facing union criticism over working conditions at its Barnsley warehouse. In a statement Tuesday, the GMB trade union cited investigations by the BBC and Buzzfeed that detailed "serious concerns" about conditions and working practices at ASOS's Barnsley warehouse in Yorkshire.

A GMB spokesman said: "ASOS is quite literally coining it in while agency workers worry whether they'll get enough hours next week to pay the bills. We're simply asking ASOS to treat the people who keep its warehouses moving with a bit of respect."

ASOS said it pays above the national minimum wage for all employees and doesn't use so-called zero-hours contracts.

"The GMB has clearly got a different agenda [to ASOS] so that's all I want to say on that," Mr. Beighton said.

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